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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Pimco: Macro Themes for 2020

(link)

See quotes below:

Recession risks, which had been elevated during the middle part of 2019, have diminished in recent months...As a consequence, we are now more confident in our baseline forecast that the current window of weakness for global growth will give way to a moderate recovery during 2020.

We will tend to favor U.S. duration over global alternatives, given the relative value and potential for capital gains in U.S. Treasuries and the scope for further Fed easing in the event of a weaker-than-expected macro outcome. While we are broadly neutral on the U.S. dollar versus other G10 currencies, we generally will favor long yen positions in accounts where currency exposure is appropriate

In addition, in asset allocation portfolios, we will look to be overweight large cap over small cap equities.

We favor both U.S. agency mortgage exposures and non-agency exposures. We believe agency mortgage-backed securities (MBS) offer attractive valuation, reasonable carry, and an attractive liquidity profile in comparison with other spread assets. We see non-agency mortgages as offering relatively attractive valuation along with a more defensive source of credit and carry and better market technicals than generic corporate credit exposure. We will also look to have select commercial MBS (CMBS) exposures. U.K. residential MBS (RMBS) also looks attractive on a relative valuation basis.

In currency strategy, we look to be overweight a basket of emerging market currencies versus the U.S. dollar and the euro.

We will tend to favor curve steepening positions in the U.S. and in other countries. U.S. Treasury Inflation-Protected Securities (TIPS) look attractive on a valuation basis

we continue to expect real U.S. GDP growth to slow to a 1.5% to 2.0% range in 2020, from an estimated 2.3% pace in 2019...We look for a modest U.S. reacceleration in the second half of 2020. China’s commitments in the Phase 1 trade deal to purchase $200 billion of additional U.S. exports over the next two years should also support growth in the second half of 2020.

We see euro area growth at around 1.0% in 2020. On balance, we see core inflation remaining close to 1.0%.

The U.K. is set to formally leave the E.U. at the end of January...we expect U.K. GDP growth of 0.75% to 1.25% in 2020,

Japan: We expect GDP growth to slow to a 0.25% to 0.75% range in 2020 from an estimated 0.9% this year...Inflation is expected to remain low in a 0.25% to 0.75% range

China: We see GDP growth slowing into a 5.0% to 6.0% range in 2020 from an estimated 6.1% in 2019.

End of Quote.

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What the above means to me?

1) Load on securitized bonds which I have been doing for years (PIMIX,VCFIX,IOFIX,EIXIX. For cash sub use SEMMX)

2) Continue to use US LC as my main equity position which I have been doing for years already

3) If you want to invest in equities abroad go with EM.

4) I will not use TIPS and I don't believe that curve steepening will affect my Multisector funds that much.

Comments

  • edited January 21
    @FD1000 ... Thanks for the fixed income tips as I'm more of an equity man and continue to build my fixed income sleeve. It is nice to have some new folks on the board that are income oriented.
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